RATE OF TAX

HC Deb 22 January 1975 vol 884 cc1559-602

Mr. David Mitchell (Basingstoke)

I beg to move Amendment No. 44, in page 25, line 36, after 'transferor', insert 'to the same transferee'.

The Deputy Chairman

With this it will be convenient to discuss also the following amendments:

No. 61, in page 25, line 36, after 'transferor', insert 'to any one transferee.'

No. 45, in page 25, line 39, after 'transferor', insert 'to that transferee'.

No. 46, in page 25, line 42, after 'transferor', insert 'to that transferee'.

No. 47, in page 26, line 2, after 'transferor', insert 'to that transferee'.

Mr. Mitchell

The amendment is designed to help the Chancellor, and I hope he will accept it. The Bill wastes the opportunity of replacing estate duty with a modern gifts and inheritance tax.

The amendment, by taxing according to the amount given to each recipient, would encourage the spreading of wealth. The Labour Party used to stand for uplifting the poor and the redistribution of wealth. Many old-time Labour Members of Parliament saw themselves as modern Robin Hoods, robbing the rich to give to the poor. This tax has the reverse effect. It robs the rich and the not-so-rich to give to the barons of bureaucracy. There is no redistributive effect, no giving to the poor, but simply a grabbing and taking to the State.

The amendment goes to the central division between the two sides of the Committee. We believe in the philosophical and economic argument which is an essential part of the case for the amendment. By concentrating wealth into the hands of the State, as it does, the Bill creates the situation that with the concentration of wealth there is a concentration of power, and with the concentration of wealth comes the concentration of decision-making. The fact that power, wealth and decision-making are totally in the hands of the State takes us well on the road to a totalitarian State and economy—the dead, outdated dogma of yesterday. The Chancellor is supposed to have renounced his early conversion to the Marxist faith, but it seems to have lived on in the tax he has produced.

Do we accept the concentration of wealth and decision-making in the hands of the Government, or do we want wealth spread throughout the community as widely as possible? The amendment seeks to achieve the latter, and I believe that this could be described as the philosophical argument.

I now turn to the economic argument, to which the Chancellor should give urgent consideration. One of the country's problems at the moment is that there is far too little investment in productive industry. In his spring Budget the Chancellor increased corporation tax and then found that he had stripped industry of its necessary working capital. He had to give it back in the autumn Budget. I shall return to this point in a moment.

The tax will encourage spending, not saving. It impels the movement of capital away from those who can best utilise it, and it is desperately unfair as between one individual and another. The nation needs more investment, and this demands saving and capital. Yesterday I noticed that on occasions Labour Members were laughing when medium-sized sums of money were being discussed. They seemed to think that it was a matter of no consequence that wealthy people would have their businesses plundered of the necessary working capital.

I have a crucial question. Why are wages in Britain lower than on the Continent? Why do we have to hold wages down? It is not because the British working man is lazy but is because there is less capital behind each worker than there is on the Continent. Too little capital per man means too low earnings per man and too low wages. As the clause stands, it represents the road to economic ruin. It will allow the Government to strip the capital out of the private sector, and that capital is necessary if the country is to grow and prosper. Even primitive man learned not to eat the seed corn but to save it, and the Government are seeking to take from the private sector the essential working capital which it should have.

The tax will encourage spending. If a man cannot pass his money on to the next generation, he will see no point in keeping it. He will ask why he should save even a brass farthing when he cannot pass his business on to the next generation. Why not eat, drink and be merry?

Let us take a practical example. If a business is worth £200,000 and the proprietor wants to give it to four people in shares of £50,000, under the Government's proposals he must find £211,870 from outside the business from his own personal wealth, over and above the value of the business, in order to do so and thus enable the four people to continue the business and the employment it provides. Under the amendment, that £200,000 would be divided into four lots of £50,000. The wealth would be spread among four people and the tax liability, though serious, would fall to £84,750. The Bill is an encouragement to expenditure that the country cannot afford. It encourages a man to have a yacht in the South of France and three mistresses. It encourages people to spend now and to say "There is nothing to be gained by saving it, because I cannot pass it on."

8.0 p.m.

Thirdly, the Bill impels the money and the capital of this country into the least dynamic and productive hands. Everyone with a business will seek to preserve it for as long as he can and will leave it to his wife. As women live longer than men, the businesses will be increasingly concentrated into the hands of grandma—the matriarchal society. What an epitaph for the Chancellor? How shall we have dynamic management of the economy when the private sector is in the hands of elderly ladies who hold the balance sheet upside down and do not know what it is all about? My right hon. Friend the Member for Finchley (Mrs. Thatcher) looks at me with an air of admonishment, but I said "elderly ladies". The Bill will create an ossified economy since the oldest people in the country will be controlling our businesses.

Incidentally, it is an interesting Government who prefer bitches to daughters. The Government will allow £50,000 to be given free of tax to the Battersea Dogs Home, but if one gives it to his own daughter he has to pay tax on it. If one's daughter is an invalid or a mongol, it does not matter. If a man is prepared to work his guts out to give the next generation security and protection, it does not matter. The tax will still have to be paid to the point at which, as the Chancellor put it, the pips squeak and the whole purpose for which a man has been building up an estate or business is destroyed.

Fourthly, the Bill is unfair as between one person and another. If a man left £100,000 in trust for his four children when they reached the age of 26, the first would receive £25,000, less the tax at £1,250; the second would receive it less £6,500; the third would receive it less £9,500; and the fourth would receive it less £11,000. That is totally unfair as between one recipient and another, each of whom is left the same amount. It cannot be justified, and it must be amended in the schedules and clauses considered in Committee upstairs.

I have looked briefly at the philosophical and economic arguments. There is also the problem of the Common Market. The Government, or part of them, are pledged to seek to negotiate to stay in the Common Market. One aspect of the Common Market is that we must move towards a harmonisation of our taxation systems. Throughout the Common Market there are systems very much like that proposed in the amendment. Luxembourg has tax exemption for direct heirs, but in all other countries except Belgium the tax is payable upon the rate received by the recipient and not as defined in the Bill.

Let us compare the case of a husband with assets of £100,000 and a wife with assets of £50,000. The father gives his son £20,000 and leaves half his estate to his wife, a quarter to his son and a quarter to his daughter. When the wife dies she leaves half to each of her children. In Holland the tax would be £4,539, in Luxembourg £4,999, in Italy £9,750, in Germany £4,033—a dynamic economy, and there is a relationship between the two; in France £17,785, in Denmark £28,434, in Belgium £13,850, and in the United Kingdom, top of the league, £35,700.

There is too little capital behind each worker in Britain. As a result of the Bill, our manufacturers, business men, family businesses and small businesses will all suffer a major drain of their essential working capital, which their competitors in Europe will not suffer. As the years go by, if the Bill remains on the statute book our workers will not be able to earn the high wages earned on the Continent, simply because their employers will not be able to put the necessary capital behind them.

It is for that reason, and the philosophical reason that we on the Conservative benches believe in spreading wealth throughout the community and not concentrating it in the hands of the State, that I move the amendment.

The Financial Secretary to the Treasury (Dr. John Gilbert)

The hon. Member for Basingstoke (Mr. Mitchell), who moved his amendment so eloquently, will not expect me to follow his philosophical arguments. There is a fundamental philosophical difference between the two sides of the Committee on this question, and it cannot be bridged this evening.

The amendment is designed to change the basis of accumulation under the capital transfer tax, so that it applies not to the totality of an individual taxpayer's gifts over his lifetime but only to those with respect to one transferee. The fundamental objection is the enormous range of avoidance possibilities that that would create. I concede that such a system would not be as complicated to administer as a full donee-type system, but it would be possible, for example, for a group of totally unconnected taxpayers, who were fortunate enough to enjoy the possession of substantial amounts of wealth, to get together and so arrange their affairs as to distribute their transfers among the members of their separate families. The result would be a considerable diminution in the total amount of tax that would be attracted.

Mr. David Mitchell

As most of the Common Market countries managed to resolve that problem, is it beyond the wit and ability of the British Treasury to do so?

Dr. Gilbert

I shall be coming to the question of international comparisons. I ask the hon. Gentleman to believe that it would be very difficult to counteract avoidance schemes of that sort, which would be perfectly legal under the amendment. The possibility of similar avoidance schemes was envisaged in the Green Paper published by the previous Government, Cmnd. 4390. I shall not weary the Committee by reading the relevant passage, which is paragraph 61.

The hon. Gentleman made international comparisons about the structure of a gifts tax or transfer tax in the various Common Market countries. I am sure that the hon. Gentleman will be the first to accept that international comparisons are dangerous, particularly those that isolate one aspect of a tax and subject it to scrutiny without consideration being given to the totality of the tax structure. It is not, of course, beyond the wit of the British Treasury to construct a tax along the lines that the hon. Gentleman suggests. It was a conscious choice that the tax was constructed in its present form.

It is true that in the cases that the hon. Gentleman outlined the tax systems allow discrimination. On the other hand, there are other régimes of gift tax—for example, in Australia, New Zealand and America—where there is no distinction. In other words, the gifts are accumulated through the lifetime of the donor without any abatement by the class of the recipient. It is a technical matter as between tax systems. I do not believe that there is any fundamental philosophical difference on that point.

I have to tell the hon. Gentleman that because of the avoidance possibilities that the amendment would permit I must advised my hon. Friends to reject the amendment.

Mr. Graham Page (Crosby)

The amendment draws attention to the farcical position that the tax is chargeable on the smallest gift if the total given by a donor reaches a certain figure. If the rate depends on the total amount given by the donor rather than the amount received by the donee there is bound to be a certain amount of unfairness and anomaly.

Perhaps I may explain the position by looking into the crystal ball and seeing what might be a reported case in a year's time. I am indebted to a chartered accountant by the name of Robert Maas, who takes a great interest in these matters. He has put forward an imaginary case.

Let us suppose that a case is heard in 1976 between the Commissioners of the Inland Revenue, and, for example, little Annie Young. The case turns on the fact that on the evening of 24th-25th December 1974 a certain Mr. St. Claus distributed some £20 million-worth of gifts to the children in this country. Let us suppose that Mr. St. Claus was not domiciled in this country but that he entered the country in December 1974 for the first time since 1st March 1974. The gifts which he distributed were distributed in this country and "transfers for value" under Clause 18(5). That would mean that although he was not domiciled in this country the property was in the United Kingdom and would be covered by Clause 22(2).

Mr. St. Claus gave little Annie a doll valued at £4. Because he had distributed about £20 million-worth of his assets to other children, little Annie was called upon to pay tax at 75 per cent. of the value of the doll. Little Annie's counsel pleaded that the gift was part of Mr. St. Claus's normal expenditure and that under Schedule 6(4) she should escape the tax. It must be shown, if that exemption is to be made, that the gift is made out of Mr. St. Claus's income; that is under Schedule 6(4)(i)(b). However, there was no evidence that Mr. St. Claus had any income, so, unfortunately, little Annie failed. It was not possible for her to say that she was the first recipient. The burden of proof is upon her to show that—and she could not do so. Little Annie was unable to show in that way that the tax should be distributed amongst all the millions of recipients. The result was that the Inland Revenue succeeded—in the first court.

But I am glad to inform the Committee that my imaginary case has a happy ending. On appeal, based on Schedule 6(8), which says that a transfer of value made in the carrying on of a trade, profession or vocation is an exempt trasfer, the Court of Appeal decided that Christmas had become so commercialised that Mr. St. Claus was carrying on a trade or vocation. The result was that is found in Annie's favour.

Mr. David Mitchell

Is my right hon. Friend sure that the figures he has given are accurate? If the doll was worth £4 and there was a distribution of substantial sums, the £4 should be grossed up. As it would represent but 40 per cent. of a 60 per cent. rate the tax which the young lady would be liable to pay would be not £4 but £6.

8.15 p.m.

Mr. Page

My hon. Friend is introducing what is a doubtful point in the Bill. I am not sure—I do not think any commentators on the Bill are sure—whether the amount would be grossed up. There would be that risk. No doubt we shall consider this problem at a later stage. It is possible that little Annie would have to pay in tax far more than the value of the doll.

Mr. J. Enoch Powell (Down, South)

I am sure that the Committee is grateful to the right hon. Member for Crosby (Mr. Page) for entertainment and for being able to contemplate the intricacies of this legislation in a lighter mood.

I venture to suggest that the fallacy of the reasoning behind the amendment is emphasised by one aspect which, rather surprisingly, the right hon. Gentleman overlooked. The gentleman in question—the donor—is a character of undoubted generosity as well as of boundless means. It is therefore improbable that in the exercise of his professional business, as it may be, or his traditional function, he would fail to ensure that little Annie received the goods undiminished. The aggregated tax liability would therefore fall upon the donor.

It seems profoundly fallacious to treat the liability as falling upon the donee. That renders all aggregation grotesque. The fallacy seems to lie in the assumption and not in the form of the tax.

Mr. Page

I refer the right hon. Member for Down, South (Mr. Powell) to Clause 23(2)(a) which says that the transferor and the transferee are made specifically liable for the tax. No doubt Mr. St. Claus would make provision for that but it is possible that the Government would sue the donee if Mr. St. Claus was domiciled outside the country and outside the jurisdiction of our courts.

Mr. Powell

I am well aware of the provision to which the right hon. Gentleman refers. The fact remains that the donor having an intention of transferring a net sum to a particular person would ensure, on his part, that any tax arising on the transfer was satisfied. I suggest that though the narrative was entertaining the analogy was grossly imperfect.

Mr. Tim Renton (Mid-Sussex)

I shall speak briefly in support of the amendment. First, I must correct a point made by the Financial Secretary. In contrasting the custom in Australia with that in the Common Market countries which my hon. Friend the Member for Basingstoke (Mr. Mitchell) quoted, the hon. Gentleman said that in Australia the tax accumulated on the donor throughout his lifetime. He was quoting that as an example, if I understood him aright, in contrast to the EEC countries.

That is quite incorrect. The custom in Australia is that the aggregate of gifts made by a donor is accumulated for a period of time only. I believe that the period is only three years. After that three-year period the slate is wiped clean, and the donor starts again. There is a purpose behind that. It is to encourage people to make gifts to their children or to pass on shares in their companies throughout their lifetime rather than to do so only in the few years before they die. Indeed, in terms of the gift tax it is a different method of wiping the slate clean that the Financial Secretary could well look at.

I wanted to speak in the debate on this amendment not only because I support the principle but because last night, when I asked the Chancellor why he could not accept the tax falling on the donee when this was the custom in all EEC countries, he said that the reason was that the tax in the EEC countries was essentially on an inheritance basis. Since he made that remarks I have looked back at the corpus of taxation in Western Europe. I must say that I find nothing which supports the Chancellor's remark. Indeed, if one looks through it one finds that in countries such as Austria, Germany and France in many cases there is a gifts tax and an estate tax, and that the burden falls on the donee and it is all quite clear cut. The rate is usually the same between estate tax and gifts tax. It is preferential for direct descendants. That is the long and the short of it.

It has been argued, as the Chancellor argued last night and as the Financial Secretary was trying to do in reply to my hon. Friend the Member for Basingstoke, that the corpus of European taxation was in some way different from what is now proposed here, and that the background was different, and that that justified their taxing the donee while we continued to tax the donor. That is an argument for which I can find no substantiation. I can only conclude that the reason why the Treasury—the Financial Secretary and his right hon. Friend—wish the tax to fall on the donor is that receipts from the tax will thus be very much greater.

We shall come to the question of rates later this evening. I do not want to deal with them now. But if the tax falls on the donor the net result must be that during his lifetime he will not give away money or shares, and thus the purpose of this tax, as a lifetime tax on all gifts, will be negated. The would-be donor is bound to hoard in order to ensure that at his death the whole estate can be treated as one, at one and the same time, and all his descendants will be treated equally. That is the way he is bound to tackle this tax if the liability for paying it remains with the donor.

One further point I want to make to the Financial Secretary is that there is great confusion in the Bill on the point about tax on the donor, as on many other points. In Clause 25(5) the Bill appears to contemplate that the donor may decline to pay the whole or part of the tax. In that case—if the Financial Secretary can bear to listen to this point—the Revenue may resort to the donee, in which case the tax claimed will be less than if the donor had paid it all, as there would be no grossing up. In Clause 25(5) there is a genuine possibility of the tax falling on the donee in such circumstances, and it has been suggested that in this way the donor could opt out of paying the tax and leave it to the donee to do so, in which case the burden of the tax would be lighter.

That is one of the many misunderstandings and misapprehensions which need to be cleared up. But I am certain that the principle advanced by my hon. Friend the Member for Basingstoke is the right one—that the burden of the tax should fall on the donee.

Mr. David Howell (Guildford)

It is a change to get back, even after listening to the few words from the Financial Secretary, from a Chancellor who clearly has very little idea at all of the implications and consequences of the legislation to a Minister who has at least followed the Bill through so far and who addressed himself to some of the issues raised by my hon. Friend the Member for Basingstoke (Mr. Mitchell). That is an improvement, even if not a very magnificent one. I suppose that we should be grateful for half a loaf rather than no loaf at all.

Many of the arguments covering the amendment were touched upon last night. That has been pointed out by my hon. Friend the Member for Mid-Sussex (Mr. Renton). I do not know whether the Financial Secretary chose Australia in the hope that it was a nice far-away country and that no one would be too certain about the arrangements prevailing there for capital transfers and a gifts tax. If he did he must now be regretting it, because my hon. Friend the Member for Mid-Sussex has shown that, in one way or another the Committee tends to have an acquaintance with and knowledge of distant countries and far-away systems. In this case my hon. Friend has shown the Financial Secretary's brief to be nonsense.

The arguments behind the amendments are straightforward enough. There is, first, the central point, made time and again by my right hon. and hon. Friends, that in this tax as it is proposed there is no redistribution. That is a fallacy. It is a misuse of words to talk as though the CTT as proposed involves redistribution. It does not do so. These amendments would change that situation radically and would provide a considerable incentive for distribution of wealth from one generation to another.

Then there is the argument touched on by my hon. Friend the Member for Mid-Sussex and put forward from the Treasury Bench that, because estate duty is established on the principle of the donor paying, it is apparently impossible to graft on to that any system which would involve the donee element, as indicated in our amendment or as implied in a full-blooded inheritance tax. When one considers just what the CCT will be doing and how far it will go in smashing up established procedures, established business methods and established ways in which people can reckon their tax liability, I should have thought that that was the last argument which would be brought forward from the Treasury Bench.

Then again, there is the argument on fairness. The kind of arrangement suggested in the amendments would be infinitely fairer. We have had the delightful fable from my right hon. Friend the Member for Crosby (Mr. Page) about the marginal umpteenth recipient of a gift from Santa Clause. This brings home what is perfectly obvious to anyone who studies the tax for rather longer than perhaps the Chancellor has bothered to do—that the accumulation principle is riddled with nonsense. It is bound to create severe unfairness as soon as one moves into the taxable range above the £15,000 minimum. It makes nonsense, as we heard last night, of any attempts to give to charities. As long as the accumulator, the aggregation principle, is there, so long are we declaring war on fairness and decreeing that there should be unfair treatment and unfair situations arising in profusion.

I am not sold on international comparisons. There is something of a neurosis in this country for comparing ourselves, often on the basis of spurious statistics, with every other country and deducing that we are a failure. I do not know whether that is a manifestation of a lack of self-confidence in the country. However, the Financial Secretary must not complain if these points are thrown back at him because he and his colleagues have, from the moment the CTT was thought of, constantly indicated, inside and outside this Chamber, that one of its virtues is that every other country has such a tax. The implication has been made—I do not know whether by the Financal Secretary but certainly by others—that the rates in other countries are heavier or certainly as heavy as anything proposed here.

We shall be able to show later that in this area as in other areas the Government's propositon about the level of the rates and their comparability with the rates of estate duty and with prevailing rates in almost any other country in the free world is wrong. However, the Financial Secretary cannot simply dismiss international comparisons as a technical matter. They are not a technical matter but a political matter because the Government have made them so by continually referring to other countries, as though the virtue of the tax is drawn from the fact that it emulates what are supposed to be systems in other countries of a similar kind.

My hon. Friend the Member for Mid-Sussex fired an initial warning shot—the first of many which will come from this side of the Committee—indicating that we do not accept the vague generalities about systems which are supposed to prevail in other countries and to inspire the system proposed by the Government. He fired a warning shot to show that the Financial Secretary, in grasping hopefully for Australia, was grasping for a broken straw because his argument did not stand up.

8.30 p.m.

The amendments would make a substantial contribution to giving realty to the call for redistribution of wealth in the genuine, creative sense so that wealth would spread and increase. That is why I shall advise my right hon. and hon. Friends to press the amendments. Even if they do not go as far as we would wish to prevent this tax from reaching the statute book and to replace it with something better, at least they would take it a stage further away from the insanity, unfairness and total lack of redistribution and the concentration in State hands which we find so deeply and utterly objectionable.

Dr. Gilbert

I do not wish to delay the Committee in resolving its differences in a Division, but I owe it to hon. Members who have raised certain points to try to provide them with factual answers which will satisfy their thirst for knowledge if not their sense of the fitness of things.

Let me deal with the delightful anecdote related by the right hon. Member for Crosby (Mr. Page). The generous donor in his example, having £20 million to give away, would presumably have seen fit to provide himself with an efficient tax adviser before starting on his programme of beneficence. However, as I am advised, even if so beneficent a donor were not domiciled in this country, both the exemption out of income and the £1,000 a year exemption would run and the young lady in question could expect to benefit from them.

The hon. Member for Mid-Sussex (Mr. Renton) asked whether the young lady would pay tax on the value received by her if the total estate had been given away and this was, as I understood it, the last item to go. The answer is that she would. The hon. Member will find the justification for that not so much in Clause 25 but in paragraph 1(2) of Schedule 9. No doubt we shall discuss that in Committee upstairs.

In answer to the hon. Member for Guildford (Mr. Howell) I do not think that I said that it was impossible to graft a donee element on to this tax. It has not been part of my case that it was impossible. In the fullness of time it might even be possible to add a donee element to a tax of this sort.

Mr. David Howell

That was not what I said.

Dr. Gilbert

That may not be what the hon. Gentleman said, but I do not seek to make a play on words.

Mr. Tim Renton

Does the Financial Secretary envisage the tax falling on the donee and the donor?

Dr. Gilbert

I was not envisaging anything. The hon. Member for Guildford asked me whether I thought it impossible to graft on a donee element. I was merely repudiating that I had denied the possibility of such a contingency.

Mr. Howell

The hon. Gentleman is just playing with the Committee, and having fun. He knows perfectly well that what we have suggested, both last night and today, is that a donee element should be introduced in succession to the estate duty arrangements. Last night the Chancellor of the Exchequer claimed that it was impossible to do that because the estate duty arrangements and the traditions surrounding them had been built up around the donor principle. I asked whether it was possible to move to a donee system, not add it to something which exists, which would be absurd, as the Financial Secretary knows perfectly well.

Dr. Gilbert

I assure the hon. Gentleman that I was not seeking to play with the Committee. That is not my wont. As I heard his words, he said that I had said that it was impossible to graft on a donee element. Perhaps my note is inaccurate. I said that as far as I could see it was not impossible to do that.

Division No. 69.]	AYES	[8.36 p.m.
Adley, Robert	Eyre, Reginald	Joseph, Rt Hon Sir Keith
Aitken, Jonathan	Fairbairn, Nicholas	Kellett-Bowman, Mrs Elaine
Alison, Michael	Fairgrieve, Russell	Kershaw, Anthony
Amery, Rt Hon Julian	Finsberg, Geoffrey	Kimball, Marcus
Arnold, Tom	Fisher, Sir Nigel	King, Evelyn (South Dorset)
Atkins, Rt Hon H. (Spelthorne)	Fletcher, Alex (Edinburgh N)	King, Tom (Bridgwater)
Awdry, Daniel	Fookes, Miss Janet	Kitson, Sir Timothy
Bain, Mrs Margaret	Fowler, Norman (Sutton C'f'd)	Knight, Mrs Jill
Baker, Kenneth	Freud, Clement	Knox, David
Banks, Robert	Fry, Peter	Lamont, Norman
Beith, A. J.	Galbraith, Hon T. G. D.	Lane, David
Bennett, Dr Reginald (Fareham)	Gardiner, George (Reigate)	Latham, Michael (Melton)
Benyon, W.	Gardner, Edward (S Fylde)	Lawrence, Ivan
Berry, Hon Anthony	Gilmour, Rt Hon Ian (Chesham)	Lawson, Nigel
Biffen, John	Gilmour, Sir John (East Fife)	Le Marchant, Spencer
Biggs-Davison, John	Glyn, Dr Alan	Lewis, Kenneth (Rutland)
Blaker, Peter	Godber, Rt Hon Joseph	Lloyd, Ian
Boscawen, Hon Robert	Goodhart, Philip	Loveridge, John
Bowden, A. (Brighton, Kemptown)	Goodhew, Victor	Luce, Richard
Boyson, Dr Rhodes (Brent)	Goodlad, Alastair	MacCormick, Iain
Braine, Sir Bernard	Gorst, John	McCrindle, Robert
Brittan, Leon	Gow, Ian (Eastbourne)	Macfarlane, Neil
Brotherton, Michael	Gower, Sir Raymond (Barry)	MacGregor, John
Brown, Sir Edward (Bath)	Grant, Anthony (Harrow C)	Macmillan, Rt Hon M. (Farnham)
Buchanan-Smith, Alick	Gray, Hamish	McNair-Wilson, M. (Newbury)
Buck, Antony	Griffiths, Eldon	McNair-Wilson, P. (New Forest)
Budgen, Nick	Grist, Ian	Madel, David
Bulmer, Esmond	Grylls, Michael	Marten, Neil
Burden, F. A.	Hall, Sir John	Mates, Michael
Carlisle, Mark	Hall-Davis, A. G. F.	Mather, Carol
Carr, Rt Hon Robert	Hamilton, Michael (Salisbury)	Maude, Angus
Chalker, Mrs Lynda	Hampson, Dr Keith	Maudling, Rt Hon Reginald
Channon, Paul	Hannam, John	Mawby, Ray
Churchill, W. S.	Harvie, Anderson, Rt Hon Miss	Maxwell-Hyslop, Robin
Clark, Alan (Plymouth, Sutton)	Hastings, Stephen	Mayhew, Patrick
Clarke, Kenneth (Rushcliffe)	Havers, Sir Michael	Meyer, Sir Anthony
Cockcroft, John	Hawkins, Paul	Mills, Peter
Cooke, Robert (Bristol W)	Hayhoe, Barney	Miscampbell, Norman
Cope, John	Henderson, Douglas	Mitchell, David (Basingstoke)
Cormack, Patrick	Heseltine, Michael	Moate, Roger
Corrie, John	Hicks, Robert	Monro, Hector
Costain, A. P.	Higgins, Terence L.	Moore, John (Croydon C)
Crawford, Douglas	Holland, Philip	More, Jasper (Ludlow)
Crouch, David	Hooson, Emlyn	Morgan, Geraint
Crowder, F. P.	Hordern, Peter	Morris, Michael (Northampton S)
Davies, Rt Hon J. (Knutsford)	Howell, David (Guildford)	Morrison, Charles (Devizes)
Dean, Paul (N Somerset)	Howell, Ralph (North Norfolk)	Morrison, Peter (Chester)
Dodsworth, Geoffrey	Howells, Geraint (Cardigan)	Mudd, David
Douglas-Hamilton, Lord James	Hutchison, Michael Clark	Neave, Airey
Drayson, Burnaby	Irving, Charles (Cheltenham)	Nelson, Anthony
du Cann, Rt Hon Edward	James, David	Neubert, Michael
Durant, Tony	Jenkin, Rt Hon P. (Wanst'd & W'df'd)	Newton, Tony
Eden, Rt Hon Sir John	Jessel, Toby	Onslow, Cranley
Edwards, Nicholas (Pembroke)	Johnson Smith, G. (E Grinstead)	Oppenheim, Mrs Sally
Elliott, Sir William	Jones, Arthur (Daventry)	Page, Rt Hon R. Graham (Crosby)
Emery, Peter	Jopling, Michael	Pardoe, John

Mr. David Mitchell

We cannot graft without first cutting the graft to be inserted. That applies in this case, as well.

Dr. Gilbert

I would never suggest that international comparisons are a technical matter. I agree with the hon. Gentleman that they would not be appropriate in this case.

I am afraid that I have to advise my hon. and right hon. Friends to resist these amendments.

Question put, That the Amendment be made:—

The Committee divided: Ayes 238, Noes 256.

Parkinson, Cecil	Shaw, Michael (Scarborough)	Thompson, George
Pattie, Geoffrey	Shelton, William (Streatham)	Thorpe, Rt Hon Jeremy (N Devon)
Penhaligon, David	Shepherd, Colin	Trotter, Neville
Percival, Ian	Silvester, Fred	Tugendhat, Christopher
Pink, R. Bonner	Sims, Roger	van Straubenzee, W. R.
Price, David (Eastleigh)	Sinclair, Sir George	Viggers, Peter
Prior, Rt Hon James	Skeet, T. H. H.	Wainwright, Richard (Colne V)
Pym, Rt Hon Francis	Smith, Cyril (Rochdale)	Wakeham, John
Raison, Timothy	Smith, Dudley (Warwick)	Walker, Rt Hon P. (Worcester)
Rathbone, Tim	Spence, John	Walker-Smith, Rt Hon Sir Derek
Rawlinson, Rt Hon Sir Peter	Spicer, Jim (W Dorset)	Walters, Dennis
Rees, Peter (Dover & Deal)	Spicer, Michael (S. Worcester)	Watt, Hamish
Reid, George	Sproat, Iain	Weatherill, Bernard
Renton, Tim (Mid-Sussex)	Stainton, Keith	Wells, John
Ridley, Hon Nicholas	Stanbrook, Ivor	Welsh, Andrew
Ridsdale, Julian	Stanley, John	Whitelaw, Rt Hon William
Rifkind, Malcolm	Steen, Anthony (Wavertree)	Wiggin, Jerry
Roberts, Michael (Cardiff NW)	Stewart, Donald (Western Isles)	Winterton, Nicholas
Roberts, Wyn (Conway)	Stewart, Ian (Hitchin)	Young, Sir G. (Ealing, Acton)
Ross, Stephen (Isle of Wight)	Taylor, R. (Croydon NW)	Younger, Hon George
Rost, Peter (SE Derbyshire)	Taylor, Teddy (Cathcart)
Royle, Sir Anthony	Tebbit, Norman	TELLERS FOR THE AYES:
Sainsbury, Tim	Temple-Morris, Peter	Mr. John Stradling Thomas and
St. John-Stevas, Norman	Thatcher, Rt Hon Margaret	Mr. Adam Butler.
Scott, Nicholas	Thomas, Rt Hon P. (Hendon S)

NOES
Abse, Leo	Davies, Bryan (Enfield N)	Huckfield, Les
Allaun, Frank	Davies, Denzil (Llanelli)	Hughes, Mark (Durham)
Anderson, Donald	Deakins, Eric	Hughes, Robert (Aberdeen N)
Archer, Peter	Dean, Joseph (Leeds West)	Hughes, Roy (Newport)
Armstrong, Ernest	de Freitas, Rt Hon Sir Geoffrey	Hunter, Adam
Ashley, Jack	Delargy, Hugh	Irving, Rt Hon S. (Dartford)
Ashton, Joe	Dell, Rt Hon Edmund	Jackson, Colin (Brighouse)
Atkins, Ronald (Preston N)	Dempsey, James	Jackson, Miss M. (Lincoln)
Atkinson, Norman	Doig, Peter	Janner, Greville
Barnett, Guy (Greenwich)	Dormand, J. D.	Jay, Rt Hon Douglas
Barnett, Rt Hon Joel	Douglas-Mann, Bruce	Jeger, Mrs Lena
Bates, Alf	Duffy, A. E. P.	Jenkins, Hugh (Putney)
Bean, R. E.	Dunn, James A.	John, Brynmor
Benn, Rt Hon Anthony Wedgwood	Dunnett, Jack	Johnson, Walter (Derby S)
Bennett, Andrew (Stockport N)	Dunwoody, Mrs. Gwyneth	Jones, Alec (Rhondda)
Bidwell, Sydney	Eadie, Alex	Jones, Berry (East Flint)
Bishop, E. S.	Edge, Geoff	Judd, Frank
Blenkinsop, Arthur	Edwards, Robert (Wolv SE)	Kaufman, Gerald
Boardman, H.	Ellis, John (Brigg & Scun)	Kelley, Richard
Booth, Albert	Ellis, Tom (Wrexham)	Kilroy-Silk, Robert
Boothroyd, Miss Betty	Ennals, David	Kinnock, Neil
Bottomley, Rt Hon Arthur	Evans, Ioan (Aberdare)	Lambie, David
Boyden, James (Bish Auck)	Evans, John (Newton)	Lamborn, Harry
Bradley, Tom	Ewing, Harry (Stirling)	Lamond, James
Bray, Dr Jeremy	Fernyhough, Rt Hon E.	Latham, Arthur (Paddington)
Brown, Hugh D. (Provan)	Flannery, Martin	Leadbitter, Ted
Buchan, Norman	Fletcher, Ted (Darlington)	Lee, John
Buchanan, Richard	Foot, Rt Hon Michael	Lever, Rt Hon Harold
Butler, Mrs Joyce (Wood Green)	Ford, Ben	Lewis, Ron (Carlisle)
Callaghan, Rt Hon J. (Cardiff SE)	Forrester, John	Lipton, Marcus
Callaghan, Jim (Middleton & P)	Fowler, Gerald (The Wrekin)	Litterick, Tom
Campbell, Ian	Fraser, John (Lambeth N'w'd)	Lomas, Kenneth
Canavan, Dennis	Freeson, Reginald	Loyden, Eddie
Carmichael, Neil	Garrett, John (Norwich S)	Luard, Evan
Carter, Ray	Garrett, W. E. (Wallsend)	Lyon, Alexander (York)
Carter-Jones, Lewis	George, Bruce	Lyons, Edward (Bradford W)
Cartwright, John	Gilbert, Dr John	McElhone, Frank
Castle, Rt Hon Barbara	Golding, John	McGuire, Michael (Ince)
Clemitson, Ivor	Gould, Bryan	Mackenzie, Gregor
Cocks, Michael (Bristol S)	Gourlay, Harry	Mackintosh, John P.
Coleman, Donald	Grant, George (Morpeth)	Maclennan, Robert
Colquhoun, Mrs Maureen	Grant, John (Islington C)	McMillan, Tom (Glasgow C)
Concannon, J. D.	Grocott, Bruce	Madden, Max
Conlan, Bernard	Hamilton, W. W. (Central Fife)	Magee, Bryan
Cook, Robin F. (Edin C)	Hamling, William	Mahon, Simon
Corbett, Robin	Hardy, Peter	Marks, Kenneth
Cox, Thomas (Tooting)	Harper, Joseph	Marshall, Dr Edmund (Goole)
Craigen, J. M. (Maryhill)	Harrison, Walter (Wakefield)	Marshall, Jim (Leicester S)
Cronin, John	Hattersley, Rt Hon Roy	Mason, Rt Hon Roy
Crosland, Rt Hon Anthony	Hatton, Frank	Meacher, Michael
Cryer, Bob	Hayman, Mrs Helene	Mellish, Rt Hon Robert
Cunningham, G. (Islington S)	Healey, Rt Hon Denis	Mikardo, Ian
Cunningham, Dr J. (Whiteh)	Heffer, Eric S.	Millan, Bruce
Dalyell, Tam	Hooley, Frank	Miller, Dr M. S. (E. Kilbride)
Davidson, Arthur	Horam, John	Miller, Mrs Millie (Ilford N)

Mitchell, R. C. (Soton, Itchen)	Rooker, J. W.	Torney, Tom
Molloy, William	Rose, Paul B.	Varley, Rt Hon Eric G.
Moonman, Eric	Ross, Rt Hon W. (Kilmarnock)	Wainwright, Edwin (Dearne V)
Morris, Alfred (Wythenshawe)	Rowlands, Ted	Walden, Brian (B'ham, L'dyw'd)
Morris, Charles R. (Openshaw)	Ryman, John	Walker, Harold (Doncaster)
Morris, Rt Hon J. (Aberavon)	Sandelson, Neville	Walker, Terry (Kingswood)
Moyle, Roland	Sedgemore, Brian	Ward, Michael
Noble, Mike	Selby, Harry	Watkins, David
Oakes, Gordon	Shaw, Arnold (Ilford South)	Watkinson, John
Ogden, Eric	Sheldon, Robert (Ashton-u-Lyne)	Weetch, Ken
O'Halloran, Michael	Shore, Rt Hon Peter	Weitzman, David
O'Malley, Rt Hon Brian	Short, Rt Hon E. (Newcasle C)	Wellbeloved, James
Orbach, Maurice	Short, Mrs Renée (Wolv NE)	White, Frank R. (Bury)
Ovenden, John	Sillars, James	White, James (Pollock)
Owen, Dr David	Silverman, Julius	Whitehead, Phillip
Padley, Walter	Skinner, Dennis	Whitlock, William
Palmer, Arthur	Smith, John (N Lanarkshire)	Williams, Alan (Swansea W)
Park, George	Snape, Peter	Williams, Alan Lee (Hornchurch)
Parker, John	Spearing, Nigel	Williams, Rt Hon Shirley (Hertford)
Parry, Robert	Spriggs, Leslie	Williams, W. T. (Warrington)
Peart, Rt Hon Fred	Stallard, A. W.	Wilson, Alexander (Hamilton)
Perry, Ernest	Stoddart, David	Wilson, William (Coventry SE)
Phipps, Dr Colin	Stott, Roger	Wise, Mrs Audrey
Prentice, Rt Hon Reg	Strang, Gavin	Woodall, Alec
Price, C. (Lewisham W)	Strauss, Rt Hon G. R.	Woof, Robert
Price, William (Rugby)	Taylor, Mrs Ann (Bolton W)	Wrigglesworth, Ian
Rees, Rt Hon Merlyn (Leeds S)	Thomas, Mike (Newcastle E)	Young, David (Bolton E)
Richardson, Miss Jo	Thomas, Ron (Bristol NW)
Roberts, Gwilym (Cannock)	Thorne, Stan (Preston South)	TELLERS FOR THE NOES:
Roderick, Caerwyn	Tierney, Sydney	Mr. James Hamilton and
Rodgers, George (Chorley)	Tinn, James	Mr. Laurie Pavitt.
Rodgers, William (Stockton)	Tomlinson, John

Question accordingly negatived.

Mr. John Pardoe (Cornwall, North)

I beg to move Amendment No. 65, in page 25, line 36, at end insert: 'such rate or rates as may be determined annually by Parliament and shall for the period from 26th March 1974 to 5th April 1975 be charged at'. This amendment, though it may not be immediately realised, is about the crucial issue of indexation. I hope that the Committee will never again enact a tax without having a discussion on the whole question of indexation of the tax system. There are some later amendments dealing with this subject, Nos. 57 and 86. I congratulate the right hon. Member for Finchley (Mrs. Thatcher) on some remarkable mathematical ingenuity, to say nothing of the algebra, in her spendid amendment No. 57.

My amendment is somewhat simpler and, I believe, more in keeping with the nature of Britain's constitution. The right hon. Lady will readily accept that there is a difficulty in indexing the tax system without a written constitution. Amendment No. 57 says, almost at the beginning and from every subsequent 6th April". That cannot be, because any Parliament can change what any previous Parliament has done. I proposed an amendment similar to that in the Standing Committee which considered last year's Finance Bill. It is possible, by dint of such an amendment, to make things a little more difficult for the Government, because instead of doing nothing they would have to introduce a clause into a future Finance Bill to change something that had already been provided for by Parliament. That is not a very severe brake on the Government's freedom of action.

If we are to have indexation of the taxation system or of any individual tax we shall have to have an entrenched clause. It should become part of a Bill of Rights. It is not my intention this evening to debate indexation or monetary correction generally. We are debating it in the context of this tax, and inevitably of taxation generally, partly because of what the Chancellor said in his speech yesterday.

Sir John Hall (Wycombe)

I am interested in the hon. Gentleman's comments on Amendment No. 57, but does not he agree that Amendment No. 65 asks a future Government to do what they are theoretically supposed to do anyway?

Mr. Pardoe

The hon. Gentleman is correct. I am well aware of the difficulties of trying to write indexation into our tax law. It is virtually impossible to do so without an entrenched clause. I agree that the amendment leaves it entirely open and calls upon the Government to do little more than they are supposed to do but do not. We have only to look at the history of estate duty to recognise that Governments all too often leave rates of tax lying idle year after year and do not correct them for inflation.

I hold strongly that we have reached such a level of inflation, and are likely in the foreseeable future to maintain such a level of inflation, that we should accept the principle of monetary correction. To make a contract or a financial arrangement in money terms at present rates of inflation is a futile action. A contract, whether for wages, borrowing, lending, rents or taxes should be made in real terms rather than in money terms. Only by doing that can we reintroduce some stability into the whole gamut of financial contracts. That means that the wage, the debt, the interest, the rent, the tax or the tax allowance is adjusted in line with the change in the cost of living.

We have already done that in an ad hoc way. In stage 3 of the Conservative Government's prices and incomes policy thresholds were introduced and have been with us since. Wage thresholds are a way of indexing wages.

Mr. Ridley

Does not the hon. Gentleman agree that thresholds index the only item of economic statistics which does not need to be indexed, because wages are a powerful group which go up faster even than the cost of living?

Mr. Pardoe

Events in the last 12 months have shown that to be true. I think even the hon. Gentleman would doubt whether it will always be true, although I agree that it is more likely to be true than otherwise. I agree that the very last thing that should be indexed is wages, because indexing wages without indexing savings undermines the whole basis of our economy and has contributed to the high rate of inflation over the past year or two.

We have to a limited extent indexed pensions because we review them every few months in the light of the cost of living and other social security and national insurance benefits. The Government have now accepted, to a limited extent, the principle enshrined in the recommendations of the Page report on national savings. However, they must go much further. I shall never again lend money to a British Government who do not guarantee my capital against the ruinous rate of inflation which their own policies go a long way to create.

It is in the context of taxation that parliamentarians and those who care for the authority and control of Parliament over the executive should most welcome indexation. By pretending that indexation does not exist Governments are able to increase taxes without parliamentary approval. They call this marvellous effect of inflation on the revenue by the splendid euphemism "buoyancy of revenue". That means no more or less than the effect of inflation. By doing nothing and letting the rate of inflation erode tax allowances any Government are able to gather a large number of poor people into the tax collector's net, which Parliament never intended when it voted the taxes. The same process makes middle-income earners into supertax payers up the scale.

Yesterday the Chancellor of the Exchequer took to task the right hon. Lady the Member for Finchley. I am glad to see that she is a convert to the principle of indexation. On the last Finance Bill I had it almost to myself, although there were some mavericks on the Conservative benches who supported it.

Mr. Ridley

May I again express my gratitude to the hon. Member for Cornwall, North (Mr. Pardoe) for supporting my amendment which was carried with the whole force of the Opposition, with the hon. Gentleman's help, and which was included in that earlier legislation in Committee? It was the first indexation amendment that had ever been carried.

Mr. Pardoe

I am not sure whether the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) would regard it as a compliment, but I regard him as a maverick Conservative in the best sense of the word. My support for his amendment on that occasion was given in that light and in light of the interpretation I place on that word.

The Chancellor said yesterday that it would be totally irresponsible for any Government to index one tax and that it was irresponsible for the Opposition even to talk of such an idea. His view was that some kind of inquiry should be set up to investigate the indexation of the whole taxation system before we went one step further. Very well—let us take the right hon. Gentleman at his word. Let us examine the Government commitment to set up an inquiry into indexation. We have the Sandilands committee on inflation accounting, but we have no committee or Royal Commission investigating the indexation of the tax system. It is time we did. I hope that the Chief Secretary will say something on this point and will give some hope that the Government will set up such an inquiry. There is no need for such an inquiry to take too long for it is not a massively complicated matter. The Chancellor also made the point that it would be wrong to make a start with a capital tax. I do not see why it would be wrong.

Parliament should never again pass a tax which is not indexed. If the Government are to come forward with new taxes Parliament should not be put in the position of not pursuing a principle in which it believes because there are other taxes which are not indexed. Of course there are others. I should like to index them all. I believe that we should make a start with this one, and that we should do so tonight. Bearing in mind the old slogan of no taxation without representation, we should now adopt the attitude that we must never again approach a debate on a new tax without the cry "No taxation without indexation".

9.0 p.m.

Mr. Powell

I am no friend of indexation. I do not believe that indexation in any way assists in the measures which have to be taken if inflation is to be brought under control and eliminated. Nor do I believe that indexation can reduce, let alone banish, the penalties and the inconveniences which must attend upon any reduction of the rate of inflation. Nevertheless, my hon. Friends and I are disposed to support the amendment, but for a much more modest reason.

It seems quite wrong that Parliament should pass a Finance Bill inaugurating a whole new system of taxation such as that of the capital transfer tax—a system which, for what fairness it may have, for what leniency may be built into it, depends upon the specification of monetary limits—without having in that Bill some means whereby those limits can be readily altered without the necessity of full legislation, because experience teaches that where legislation is necessary for that purpose, it is often resorted to very belatedly, or not at all.

Mr. Norman Lamont (Kingston-upon-Thames)

I do not want to interrupt the flow of my right hon. Friend's argument, but I was interested in what he said about his reasons for being against indexation. I do not think that many hon. Members who have spoken in the debates have supported indexation amendments on the ground that they would help to reduce inflation. They have supported them on the ground simply of equity between one income bracket and another, and because they believe, given that inflation is here and there is no sign that it will desist, that it is a way of equitably adapting to that unfortunate fact.

Mr. Powell

I am familiar with that view of the merits of indexation also, but I do not share it, because I do not believe that we should live with inflation and devise means for making ourselves comfortable on the assumption that inflation will continue indefinitely at rates which call for this kind of adjustment.

To return to the point that I was making, the Bill embodies in the code of the capital transfer tax a number of crucial money figures. They apply to the treatment of agriculture and to the scale as a whole, and in many other ways. Certainly the Chief Secretary would not claim that his Bill would be as satisfactory or as fair if it did not include those limits in money terms. But, if so, he must accept the consequence. That is, that if, in the next 12 months, inflation alters by, let us say, 20 per cent. the real meaning of those limitations, the intention of this House, his intention, and the fairness to be claimed for that intention, are to that extent severely damaged. It seems quite wrong that he should propose to place on the statute book, in statutory permanent form, without the machinery for frequent modification, as necessary, money figures upon which the fairness of a whole system of tax depends.

The Amendment Paper contains several alternative methods of approaching this problem. One, to which glancing reference was made by the hon. Member for Cornwall, North (Mr. Pardoe), is the attempt of the official Opposition at a full-scale mechanism of indexing. The hon. Member has been much more modest, suggesting in his amendment that the rate should be fixed for one year and that therefore it should be necessary for subsequent Finance Bills, presumably, to fix the rate year by year.

That is one way of doing it. My hon. Friend the Member for Londonderry (Mr. Ross) will, later in the proceedings elsewhere, I hope, move an amendment which seeks the same result by what I believe may be the most convenient and simple method, namely, giving to the Treasury a power of raising limits and exemptions. This is not a power to tax. This is a power to relieve from taxation and one that therefore may properly be exercised by statutory instrument.

Whatever may be the method by which the end is attained, I believe that the Committee ought at an early stage to show its sense that it is not right for us to rest in so important a manner upon money figures of which the real meaning we well know will be substantially different within six months, let alone a year.

I therefore hope that there will be general support for the amendment—support which need not commit any of us to the method which the hon. Gentleman has adopted. I hope that we shall have from the Treasury Bench some indication, at any rate, of sympathy with the object of the amendment.

Mr. Ridley

I am in substantial agreement with all that the hon. Member for Cornwall, North (Mr. Pardoe) said, except that I would like to hear him one day expound on the difference between a maverick in the best sense of the word and a maverick in the worst sense of the word. The difference was not immediately clear to me from his kind remarks.

I do not intend to make a speech about indexation. I remind the Chief Secretary of that jolly little episode in Committee on the Finance Bill last summer when, to the horror of the Treasury officials and, I suspect, of himself, an indexation amendment was carried to the figure of £25,000 as the limit for mortgage interest relief.

The Government were much more amenable and flexible in the days when they did not have much of a majority. I remember how far along the slippery pole the right hon. Gentleman crept out in order to placate the Opposition and to persuade them, if he could, not to put it into the Bill. He went so far as to promise that there would be a very close review of the £25,000 figure and that on every possible occasion the Government would come forward with proposals to upgrade it. His protestations of sincerity, honesty and good intentions so affected the House of Commons when the Bill returned on Report that hon. Members—silly mugs—believed him and did not press for the amendment to stay.

So I look at the figure of £25,000 of mortgage relief which came in last March, 10 months ago. I looked through the Bill with interest and eagerness when it was published to see whether the figure of £25,000 mortgage relief was to be increased to the £30,000 which is should now be. To my astonishment it is not there. There is no clause about it. It is not even possible to put it within the Long Title.

Therefore, we cannot rely upon the Treasury's good intentions. Not even the right hon. Gentleman, whom I hold in high esteem, can be trusted. Are we going to be able to succeed in the next Finance Bill, by which time much more than a year will have passed before we see the Bill and know what the new rate can be? So we cannot rely on the Government's good intentions in this matter.

There must be some device by which the House of Commons can insist upon these figures being reviewed by whatever means is most appropriate. We look to the Chief Secretary tonight to make a statement about what the Government will do about the very serious problem of the value of capital figures dwindling year by year and greatly eroding the fast dwindling reserves of the citizenry.

But there is a special reason in relation to this tax why we should have a firm reply from the Government tonight. It is not a tax which applies for one year only. It is not a tax on transactions of short duration. It is a tax which accumulates and affects a taxpayer for the whole of his life, and if he is to make sensible disposition of his resources, either by gift or by keeping them until he dies, he must know the rates of tax which he will have to pay at any stage.

No taxpayer knows what rate of tax on capital transfer will apply beyond this year because by next year the value of money may have changed to such an extent that the tax will bear very much more hard, and 50 years ahead, by which time he may be dead, the value of these slices will be so different that no calculation will be possible.

Curiously enough, failure by the Government to accept this amendment will lead to an earlier transfer of property than would otherwise have been the case. Plainly, if we are not to have the tax indexed, it will be slightly more advantageous to give early than to give late, because when we come to the point when the £15,000, the exempt slice, is the price of a packet of cigarettes, which may be only 10 years ahead—or 10 months ahead, or perhaps even only 10 days ahead, to judge by the way the Government are conducting their economic policy—the tax will bear much harder. It will bear much harder with each year that goes by, so there is some incentive to make early gifts.

It is a fundamental defect of the tax as the Government have drawn it that although the rates of tax applicable to any transfer taking place in the near future are determined, the rates of tax to apply to any transfer some time ahead, or when the man dies, are totally unknown because the value of money will affect people to such an extent as to make nonsense of the whole thing, especially among those in the lower brackets who do not have great wealth.

It is, therefore, incumbent upon the Government to tell us their intentions for uprating the values of the slices in this clause. If they say that they intend to keep them in line with changes in the value of money, that they do not intend to do so, that they intend to have an annual review or a biannual review, or that they intend to pursue some other policy on the matter, at least taxpayers will have some idea of what is likely to happen in the future. For this reason, we want both a general statement from the Government of their policy in this matter and a particular statement in relation to this tax and what they intend to do about the severe erosive effects which inflation will have upon the value of the relief.

The Chief Secretary to the Treasury (Mr. Joel Barnett)

We have had an interesting debate on several indexation questions. The right hon. Member for Down, South (Mr. Powell) told us, not altogether surprisingly, that he did not agree with the idea of indexation but agreed with the amendment, for the perfectly sound reasons which he gave. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), on the other hand, agreed with the amendment but wanted me to give an assurance that the Treasury would constantly keep the rates in line with inflation, whether yearly, half-yearly or in some other way.

One accepts that, with the present level of inflation, the thresholds or rates in this tax and in other taxes will need constant review. I give the absolute assurance that we shall keep these thresholds under constant review. The right hon. Gentleman referred specifically to agricultural relief. There I entirely agree with him. It is absolutely crucial that the threshold should be kept under review because it could very much diminish in value depending on what happened to the price of land. I can give him the assurance that we intend to keep it under review. My right hon. Friend has said as much.

9.15 p.m.

The hon. Member for Cirencester and Tewkesbury referred to one of the many little incidents which took place in Standing Committee last summer on the question of the £25,000 mortgage interest relief. He seemed to imply, in spite of the high esteem in which he holds me, that I might go back on the undertaking that we would keep these matters under review—

Mr. Ridley

The Chief Secretary has already gone back on it.

Mr. Barnett

That is not the case. We have had an autumn Finance Bill and we have yet to come to the spring Finance Bill, which will occur one year after the previous spring Finance Bill. If house prices have declined in the period it may be necessary, as I am sure the hon. Member has recognised, to reduce the relief from £25,000. We may find that it would have to be reduced to £23,000 or £24,000, but out of pure beneficence we might not want to change it. Hon. Members might therefore conclude that we had not reviewed the matter, but that would not be true.

Mr. Lawson

The Chief Secretary has got hold of the wrong end of the stick on this matter. We are not here concerned with what happens to house prices. The important thing is what happens to the value of money. If the value of money has fallen, as it has, the indexation or adjustment should push the rate up, not down. The rate has nothing to do with the level of house prices.

Mr. Barnett

I am obliged to the hon. Member for Blaby (Mr. Lawson) for his brief lecture, and I am sure that he will give us longer lectures upstairs in Committee. I look forward to them. I appreciate the hon. Member's position over indexation. The hon. Member for Cornwall, North (Mr. Pardoe), in the absence of the hon. Member for Blaby, claimed credit for having first introduced the whole question of indexation. Another Conservative Member, however, disclaimed the fact that it was the hon. Member for Cornwall, North or his hon. Friends who first raised the matter. The hon. Member for Cornwall, North said that a few mavericks on the Tory benches had raised the matter. I would not call the hon. Member for Blaby a maverick. I might call him many other things, but not that.

It is, of course, always open to Parliament to review not only the thresholds of capital transfer tax but the rates and thresholds for all taxes every year. We review these rates regularly, and we are doing so at the moment. The amendment of the hon. Member for Cornwall, North is therefore unnecessary. Even if he had accepted that fact I am sure that that would not have prevented his tabling the amendment, because he wanted a brief debate on indexation. I am happy to oblige him briefly, even though I know that other hon. Members may prefer to get on.

The hon. Gentleman said that without a similar clause in the past estate duty thresholds had not been regularly reviewed and increased in line with inflation. That is not strictly true. Over the past 20 years the initial thresholds on estate duty have not been ungenerous. They have increased at twice the rate of the retail price index, although I concede that that does not apply to the higher thresholds. Certainly, thresholds have been reviewed throughout the period.

Mr. Lawson

Not every year.

Mr. Barnett

It was not necessary every year. I am sure that even the hon. Gentleman, with his desire to index everything, agrees that it would not always be necessary to change the thresholds every year. I am sure that his right hon. Friend the Member for Finchley (Mrs. Thatcher), with her newfound love of indexation, would not want to do it every year.

I know that many hon. Members think that indexation is one of the answers to our problems. It is possible to accept indexation or, as the hon. Gentleman says in the amendment, compulsory redetermination from time to time, in certain areas, such as the inflation stock relief that we have given in Clause 16 and one or two other areas, and any review of rates or the threshold for which the right hon. Member for Down, South has asked might be effectively indexed with inflation. But that is a far cry from general indexation.

The hon. Gentleman said that we should index not only capital transfer tax but all taxes. One cannot stop there. One must carry it much further, into a general indexation of virtually all the remaining areas.

I was pleased to note that the last time we debated the matter the former right hon. Member for Wolverhampton, South-West, now the right hon. Member for Down, South, and the present hon. Member for Wolverhampton, South-West (Mr. Budgen) were of the same mind in this matter. It must be something to do with Wolverhampton.

Mr. Lawson

If it is true that if we index one thing we must index everything, why does Clause 11 introduce one element of indexation for one particular savings bond?

Mr. Barnett

I said precisely—the hon. Gentleman can read it in Hansard tomorrow—that it is perfectly possible to index certain items, as we have done in Clause 16 with stock relief. But what the hon. Gentleman and many others are seeking is general indexation. They are in danger of somewhat lightly coming to the view that indexation is the answer to all our problems. I do not agree with the arguments adduced by the right hon. Member for Down, South against general indexation. In due time there may prove to be a case for it, but the case has not yet been proved.

I hope that most hon. Members, other than those who are obsessed with the idea of across-the-board indexation, will recognise that it is at least possible that it could lead to an acceleration rather than a deceleration of inflation. It could stop. I am not saying that it will stop.

Mr. Norman Lamont

How?

Mr. Barnett

I thought that the hon. Gentleman would ask me that. Many of those who in the past have benefited from wage indexation would be able to secure further wage increases on top of the indexed threshold increases. We have a free society and we intend to have a non-statutory incomes policy. In that sense at least further increases would be possible. Indeed, that is precisely what the right hon. Gentleman the Leader of the Opposition said recently in the House.

Mr. Lamont

What is being suggested is the indexation of tax thresholds and not of wages, as such. It may be argued that indexation relieves some of the pressures on wages.

Mr. Barnett

I wish the hon. Gentleman would do me the courtesy of listening to me. I am sure that it will be found in Hansard that I have said that if we go so far as to index all tax reliefs and all tax thresholds we shall be going very much along the road towards general indexation. Matters become difficult once that stage is reached. I am sure that I carry at least one member of the Liberal Party with me, namely the hon. Member for Cornwall, North (Mr. Pardoe).

Mr. Cyril Smith (Rochdale)

The right hon. Gentleman carries me with him.

Mr. Barnett

I see that I also carry the hon. Member for Rochdale (Mr. Smith) with me—an hon. Member whom I surround, in a constituency sense. It has not yet been proved that there should be generalised indexation. Nor do I believe it would be right to single out one form of indexation in the form suggested by the amendment. In any event, the amendment is not strictly necessary for the capital transfer tax. I gladly give the assurance that we shall review these matters regularly, particularly in terms of the agricultural reliefs that the Bill provides.

Mr. Ridley

I asked the right hon. Gentleman a specific question. Is it the Government's intention, by whatever means they think best, to keep the values of the slices, or whatever they are called, of this tax broadly in line with the changes in the value of money? He has said that he will review the position from time to time. Does that mean that he will review it and decide whether he thinks the pips can be made to squeak a bit harder, or will he review it with a view to bringing up the rate to the value that Parliament is now being asked to validate?

Mr. Barnett

Either the hon. Gentleman is naïve or he is expecting me to be naïve. He is asking me to say that I shall agree to index the rates although I do not want to put that into the Bill. The answer is that we shall review the rates regularly. I am not prepared to give the hon. Gentleman a firm commitment as to how we shall review them. Previous Governments have never been able to do so. That was the position before our predecessors had the idea of indexation. I repeat that the amendment is strictly unnecessary and I hope that it will be withdrawn.

Sir John Hall

The Chief Secretary referred to the problem of applying indexation to wages. Is it not a fact that the social contract is in itself a form of indexation? Does it not apply rises in wages to the rise in the cost of living? Does he think that the social contract will fail?

Mr. Barnett

No, Sir.

Mrs. Thatcher

I have been at the Government Dispatch Box in another capacity and I have replied to various debates and Questions. I know full well that when a Minister has not a clue what to say he will say that he will keep the matter under constant review. It does not mean very much. A Minister will often use that phrase when matters are put before him for the first time which he has not considered. It is a standard, stock reply. "Constant review" often means no review at all.

This is a modest amendment. It does not seek full indexation. If we do not have indexation and if we continue with the present rate of inflation, or even a lower rate of inflation, we shall find that the effect on property is even more devastating than was envisaged when the tax rate was introduced. The rate at which property will pass into the hands of the State will be more rapid than the Chancellor envisaged, and that is saying something.

9.30 p.m.

The figures in the Bill are the figures which were envisaged last March. In real terms they already mean that the tax will grip at a lower figure. I do not think that when we are introducing a new tax, in the circumstances which at present prevail, we can leave that tax without making positive provision for Parliament to look at the rate annually. It is not sufficient to leave the Treasury or Inland Revenue to look at the rates annually. We must look at them. I hope that the hon. Member for Cornwall, North (Mr. Pardoe) will press the amendment. If he does, we shall support him.

[Mr. BRYANT GODMAN IRVINE in the Chair]

Mr. Pardoe

I agree with the right hon. Member for Finchley (Mrs. Thatcher) that this is a modest amendment, and it was phrased with that intention. I happen to be in favour of overall indexation, as the Chief Secretary correctly said. When one starts on the road, one probably has to proceed down it. Certainly one has to proceed down it when one has started on the road of taxation.

The right hon. Member for Down, South (Mr. Powell) said that he supported the amendment but for rather more modest reasons. I am glad to have his support for any reason whatever. He said that he was not a friend to indexation and that we could not tackle inflation that way. All I will say to him is this. Fairness is important, as he said, and equity is important. I happen to believe that indexation would be part of the weaponry with which we could successfully tackle inflation.

The right hon. Gentleman and I have a unique distinction in the House of Commons. We are the only two Members who claim absolutely and utterly that we know how to solve the problem of inflation. We would not do it in the same way. Nevertheless we each have our totally effective methods. The only thing is that we are not getting any nearer to being able or allowed to put them into practice. That is unfortunate, but there it is.

However, if we are to conquer inflation—I say this to the right hon. Member for Down, South and to the Chief Secretary—we must make it politically possible to do so. We must, therefore, reduce the painful side effects of ending it, and this can best be done by making financial contracts in real terms rather than in money terms. Indexation, through the tax system or anything else, is not a soft option. It does not seek to take the sting out of inflation but seeks to take the sting out of defeating inflation.

I say to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley)—as he asked me, he had better know—that the answer to his question "When is a maverick not a maverick?" is that he is a maverick in the best sense when he agrees with me and a maverick in the worst sense when he does not agree with me. He is now a maverick in the best sense, and long may he remain so.

The Chief Secretary promised us that he would review the tax rates in line with the cost of living. He promised us that this might even happen in the spring Finance Bill. He introduces these Bills like other people eat oysters—when there is an "R" in the month. His promises about reviewing tax thresholds or the rates of tax on capital transfers are not worth very much. He said that the amendment was not strictly necessary. I suppose that in his terms it is not strictly necessary. But in the way in which death duty has been applied over the years—we must go right back to the time of Sir Stafford Cripps, who was no mean Chancellor in extracting every last penny from the wealthy—it has not kept pace with the cost of living. It has not been reviewed in line with the rise in the cost of living.

Therefore I believe that the Government, without an amendment of this sort applying to every tax, have a vested interest in the perpetuation of inflation. It is that interest which we seek to remove from the Government and we seek to give

Division No. 70.]	AYES	[9.35 p.m.
Adley, Robert	Gilmour, Rt Hon Ian (Chesham)	McNair-Wilson, M. (Newbury)
Aitken, Jonathan	Glyn, Dr Alan	McNair-Wilson, P. (New Forest)
Alison, Michael	Godber, Rt Hon Joseph	Madel, David
Amery, Rt Hon Julian	Goodhart, Philip	Marten, Neil
Arnold, Tom	Goodhew, Victor	Mates, Michael
Atkins, Rt Hon H. (Spelthorne)	Goodlad, Alastair	Mather, Carol
Awdry, Daniel	Gorst, John	Maude, Angus
Bain, Mrs Margaret	Gow, Ian (Eastbourne)	Maudling, Rt Hon Reginald
Baker, Kenneth	Gower, Sir Raymond (Barry)	Mawby, Ray
Banks, Robert	Grant, Anthony (Harrow C)	Maxwell-Hyslop, Robin
Beith, A. J.	Gray, Hamish	Mayhew, Patrick
Bennett, Dr Reginald (Fareham)	Griffiths, Eldon	Meyer, Sir Anthony
Benyon, W.	Grimond, Rt Hon J.	Mills, Peter
Berry, Hon Anthony	Grist, Ian	Miscampbell, Norman
Biffen, John	Grylls, Michael	Mitchell, David (Basingstoke)
Biggs-Davison, John	Hall, Sir John	Moate, Roger
Blaker, Peter	Hall--Davis, A. G. F.	Molyneaux, James
Boscawen, Hon Robert	Hamilton, Michael (Salisbury)	Monro, Hector
Bowden, A. (Brighton, Kemptown)	Hampson, Dr Keith	Moore, John (Croydon C)
Boyson, Dr Rhodes (Brent)	Hannam, John	More, Jasper (Ludlow)
Braine, Sir Bernard	Harvie, Anderson, Rt Hon Miss	Morgan, Geraint
Brittan, Leon	Hastings, Stephen	Morris, Michael (Northampton S)
Brotherton, Michael	Havers, Sir Michael	Morrison, Charles (Devizes)
Brown, Sir Edward (Bath)	Hawkins, Paul	Morrison, Peter (Chester)
Buchanan-Smith, Alick	Hayhoe, Barney	Mudd, David
Buck, Antony	Henderson, Douglas	Neave, Airey
Budgen, Nick	Heseltine, Michael	Nelson, Anthony
Bulmer, Esmond	Hicks, Robert	Neubert, Michael
Burden, F. A.	Higgins, Terence L.	Newton, Tony
Butler, Adam (Bosworth)	Holland, Philip	Onslow, Cranley
Carlisle, Mark	Hooson, Emlyn	Oppenheim, Mrs Sally
Carr, Rt Hon Robert	Hordern, Peter	Page, Rt Hon R. Graham (Crosby)
Carson, John	Howell, David (Guildford)	Parkinson, Cecil
Chalker, Mrs Lynda	Howell, Ralph (North Norfolk)	Pattie, Geoffrey
Channon, Paul	Howells, Geraint (Cardigan)	Penhaligon, David
Churchill, W. S.	Hutchison, Michael Clark	Percival, Ian
Clark, Alan (Plymouth, Sutton)	Irving, Charles (Cheltenham)	Pink, R. Bonner
Clarke, Kenneth (Rushcliffe)	James, David	Powell, Rt Hon J. Enoch
Cockcroft, John	Jenkin, Rt Hon P. (Wanst'd & W'df'd)	Price, David (Eastleigh)
Cooke, Robert (Bristol W)	Jessel, Toby	Prior, Rt Hon James
Cope, John	Johnson Smith, G. (E Grinstead)	Pym, Rt Hon Francis
Cormack, Patrick	Jones, Arthur (Daventry)	Raison, Timothy
Corrie, John	Jopling, Michael	Rathbone, Tim
Costain, A. P.	Joseph, Rt Hon Sir Keith	Rawlinson, Rt Hon Sir Peter
Crawford, Douglas	Kaberry, Sir Donald	Rees, Peter (Dover & Deal)
Crouch, David	Kellett-Bowman, Mrs Elaine	Reid, George
Crowder, F. P.	Kershaw, Anthony	Renton, Rt Hon Sir D. (Hunts)
Davies, Rt Hon J. (Knutsford)	Kimball, Marcus	Renton, Tim (Mid-Sussex)
Dean, Paul (N Somerset)	King, Evelyn (South Dorset)	Ridley, Hon Nicholas
Dodsworth, Geoffrey	King, Tom (Bridgwater)	Ridsdale, Julian
Douglas-Hamilton, Lord James	Kitson, Sir Timothy	Rifkind, Malcolm
Drayson, Burnaby	Knight, Mrs Jill	Roberts, Michael (Cardiff NW)
Durant, Tony	Knox, David	Roberts, Wyn (Conway)
Eden, Rt Hon Sir John	Lamont, Norman	Ross, Stephen (Isle of Wight)
Edwards, Nicholas (Pembroke)	Lane, David	Ross, William (Londonderry)
Elliott, Sir William	Langford-Holt, Sir John	Rost, Peter (SE Derbyshire)
Eyre, Reginald	Latham, Michael (Melton)	Royle, Sir Anthony
Fairbairn, Nicholas	Lawrence, Ivan	Sainsbury, Tim
Fairgrieve, Russell	Lawson, Nigel	St. John-Stevas, Norman
Finsberg, Geoffrey	Le Marchant, Spencer	Scott, Nicholas
Fisher, Sir Nigel	Lewis, Kenneth (Rutland)	Shaw, Michael (Scarborough)
Fletcher, Alex (Edinburgh N)	Lloyd, Ian	Shelton, William (Streatham)
Fookes, Miss Janet	Loveridge, John	Shepherd, Colin
Fowler, Norman (Sutton C'f'd)	Luce, Richard	Silvester, Fred
Freud, Clement	McCrindle, Robert	Sims, Roger
Fry, Peter	McCusker, H.	Sinclair, Sir George
Galbraith, Hon T. G. D.	Macfarlane, Neil	Skeet, T. H. H.
Gardiner, George (Reigate)	MacGregor, John	Smith, Dudley (Warwick)
Gardner, Edward (S Fylde)	Macmillan, Rt Hon M. (Farnham)	Spence, John

back to Parliament the control which our forefathers fought so hard to establish.

Question put, That the amendment be made:—

The Committee divided: Ayes 244, Noes 256.

Spicer, Jim (W Dorset)	Thatcher, Rt Hon Margaret	Watt, Hamish
Spicer, Michael (S. Worcester)	Thomas, Rt Hon P. (Hendon S)	Weatherill, Bernard
Sproat, Iain	Thompson, George	Wells, John
Stainton, Keith	Thorpe, Rt Hon Jeremy (N Devon)	Welsh, Andrew
Stanbrook, Ivor	Trotter, Neville	Whitelaw, Rt Hon William
Stanley, John	Tugendhat, Christopher	Wiggin, Jerry
Steen, Anthony (Wavertree)	van Straubenzes, W. R.	Winterton, Nicholas
Stewart, Donald (Western Isles)	Viggers, Peter	Young, Sir G. (Ealing, Acton)
Stewart, Ian (Hitchin)	Wainwright, Richard (Colne V)	Younger, Hon George
Stradling Thomas, J.	Wakeham, John
Taylor, R. (Croydon NW)	Walder, David (Clitheroe)	TELLERS FOR THE AYES:
Taylor, Teddy (Cathcart)	Walker, Rt Hon P. (Worcester)	Mr. John Pardoe and
Tebbit, Norman	Walker-Smith, Rt Hon Sir Derek	Mr. Cyril Smith.
Temple-Morris, Peter	Walters, Dennis

NOES
Abse, Leo	Dunnett, Jack	Latham, Arthur (Paddington)
Allaun, Frank	Dunwoody, Mrs. Gwyneth	Leadbitter, Ted
Anderson, Donald	Eadie, Alex	Lee, John
Archer, Peter	Edge, Geoff	Lever, Rt Hon Harold
Armstrong, Ernest	Edwards, Robert (Wolv SE)	Lewis, Ron (Carlisle)
Ashley, Jack	Ellis, John (Brigg & Scun)	Lipton, Marcus
Ashton, Joe	Ellis, Tom (Wrexham)	Litterick, Tom
Atkins, Ronald (Preston N)	Ennals, David	Lomas, Kenneth
Atkinson, Norman	Evans, Ioan (Aberdare)	Loyden, Eddie
Barnett, Guy (Greenwich)	Evans, John (Newton)	Luard, Evan
Barnett, Rt Hon Joel	Ewing, Harry (Stirling)	Lyon, Alexander (York)
Bates, Alf	Fernyhough, Rt Hon E.	Lyons, Edward (Bradford W)
Bean, R. E.	Flannery, Martin	McElhone, Frank
Benn, Rt Hon Anthony Wedgwood	Fletcher, Ted (Darlington)	McGuire, Michael (Ince)
Bennett, Andrew (Stockport N)	Foot, Rt Hon Michael	Mackenzie, Gregor
Bidwell, Sydney	Ford, Ben	Mackintosh, John P.
Bishop, E. S.	Forrester, John	Maclennan, Robert
Blenkinsop, Arthur	Fowler, Gerald (The Wrekin)	McMillan, Tom (Glasgow C)
Boardman, H.	Fraser, John (Lambeth, N'w'd)	Madden, Max
Booth, Albert	Freeson, Reginald	Magee, Bryan
Boothroyd, Miss Betty	Garrett, John (Norwich S)	Mahon, Simon
Bottomley, Rt Hon Arthur	Garrett, W. E. (Wallsend)	Marks, Kenneth
Boyden, James (Bish Auck)	George, Bruce	Marshall, Dr Edmund (Goole)
Bradley, Tom	Gilbert, Dr John	Marshall, Jim (Leicester S)
Bray, Dr Jeremy	Golding, John	Mason, Rt Hon Roy
Brown, Hugh D. (Provan)	Gould, Bryan	Meacher, Michael
Buchan, Norman	Gourlay, Harry	Mellish, Rt Hon Robert
Buchanan, Richard	Grant, George (Morpeth)	Mikardo, Ian
Butler, Mrs Joyce (Wood Green)	Grant, John (Islington C)	Millan, Bruce
Callaghan, Rt Hon J. (Cardiff SE)	Grocott, Bruce	Miller, Dr M. S. (E. Kilbride)
Callaghan, Jim (Middleton & P)	Hamilton, James (Bothwell)	Miller, Mrs Millie (Ilford N)
Campbell, Ian	Hamilton, W. W. (Central Fife)	Mitchell, R. C. (Soton, Itchen)
Canavan, Dennis	Hamling, William	Molloy, William
Carmichael, Neil	Hardy, Peter	Moonman, Eric
Carter, Ray	Harper, Joseph	Morris, Alfred (Wythenshawe)
Carter-Jones, Lewis	Harrison, Walter (Wakefield)	Morris, Charles R. (Openshaw)
Cartwright, John	Hattersley, Rt Hon Roy	Morris, Rt Hon J. (Aberavon)
Castle, Rt Hon Barbara	Hatton, Frank	Moyle, Roland
Clemitson, Ivor	Hayman, Mrs Helene	Newens, Stanley
Cocks, Michael (Bristol S)	Healey, Rt Hon Denis	Noble, Mike
Coleman, Donald	Heffer, Eric S.	Oakes, Gordon
Colquhoun, Mrs Maureen	Hooley, Frank	Ogden, Eric
Concannon, J. D.	Horam, John	O'Halloran, Michael
Conlan, Bernard	Hoyle, Douglas (Nelson)	O'Malley, Rt Hon Brian
Cook, Robin F. (Edin C)	Huckfield, Les	Orbach, Maurice
Corbett, Robin	Hughes, Mark (Durham)	Ovenden, John
Cox, Thomas (Tooting)	Hughes, Robert (Aberdeen N)	Owen, Dr David
Craigen, J. M. (Maryhill)	Hughes, Roy (Newport)	Padley, Walter
Cronin, John	Hunter, Adam	Palmer, Arthur
Crosland, Rt Hon Anthony	Irving, Rt Hon S. (Dartford)	Park, George
Cryer, Bob	Jackson, Colin (Brighouse)	Parker, John
Cunningham, G. (Islington S)	Jackson, Miss M. (Lincoln)	Parry, Robert
Cunningham, Dr J. (Whiteh)	Janner, Greville	Pavitt, Laurie
Dalyell, Tam	Jay, Rt Hon Douglas	Peart, Rt Hon Fred
Davidson, Arthur	Jeger, Mrs Lena	Perry, Ernest
Davies, Bryan (Enfield N)	Jenkins, Hugh (Putney)	Phipps, Dr Colin
Davies, Denzil (Llanelli)	John, Brynmor	Prentice, Rt Hon Reg
Deakins, Eric	Jones, Alec (Rhondda)	Price, C. (Lewisham W)
Dean, Joseph (Leeds West)	Jones, Barry (East Flint)	Price, William (Rugby)
de Freitas, Rt Hon Sir Geoffrey	Judd, Frank	Rees, Rt Hon Merlyn (Leeds S)
Delargy, Hugh	Kaufman, Gerald	Richardson, Miss Jo
Dell, Rt Hon Edmund	Kelley, Richard	Roberts, Gwilym (Cannock)
Dempsey, James	Kilroy-Silk, Robert	Roderick, Caerwyn
Doig, Peter	Kinnock, Neil	Rodgers, George (Chorley)
Douglas-Mann, Bruce	Lambie, David	Rodgers, William (Stockton)
Duffy, A. E. P.	Lamborn, Harry	Rooker, J. W.
Dunn, James A.	Lamond, James	Rose, Paul B.

Ross, Rt Hon W. (Kilmarnock)	Strauss, Rt Hon G. R.	White, Rank R. (Bury)
Rowlands, Tad	Taylor, Mrs Ann (Bolton W)	White, James (Pollock)
Ryman, John	Thomas, Mike (Newcastle E)	Whitehead, Phillip
Sandelson, Neville	Thomas, Ron (Bristol NW)	Whitlock, William
Sedgemore, Brian	Thorne, Stan (Preston South)	Williams, Alan (Swansea W)
Selby, Harry	Tierney, Sydney	Williams, Alan Lee (Hornchurch)
Shaw, Arnold (Ilford South)	Tinn, James	Williams, Rt Hon Shirley (Hertford)
Sheldon, Robert (Ashton-u-Lyne)	Tomlinson, John	Williams, W. T. (Warrington)
Shore, Rt Hon Peter	Torney, Tom	Wilson, Alexander (Hamilton)
Sillars, James	Varley, Rt Hon Eric G.	Wilson, William (Coventry SE)
Silverman, Julius	Wainwright, Edwin (Dearne V)	Wise, Mrs Audrey
Skinner, Dennis	Walden, Brian (B'ham, L'dyw'd)	Woodall, Alec
Smith, John (N Lanarkshire)	Walker, Harold (Doncaster)	Woof, Robert
Snape, Peter	Walker, Terry (Kingswood)	Wrigglesworth, Ian
Spearing, Nigel	Ward, Michael	Young, David (Bolton E)
Spriggs, Leslie	Watkins, David
Stallard, A. W.	Watkinson, John	TELLERS FOR THE NOES:
Stoddart, David	Weetch, Ken	Mr. J. D. Dormand and
Stott, Roger	Weitzman, David	Mr. Walter Johnson.
Strang, Gavin	Wellbeloved, James

Question accordingly negatived.

9.45 p.m.

Mr. Anthony Steen (Liverpool, Wavertree)

I beg to move Amendment No. 90, in page 26, line 3, at end insert: 'Provided that no transfers of value for the benefit of charities shall be aggregated for the purposes of this section'. The purpose of the amendment is to allow gifts to voluntary charitable organisations up to any amount during the donor's lifetime or on his death and to remove the financial penalty if he chooses to give to voluntary charitable bodies more than the fixed amount prescribed by the Government of his already heavily taxed income.

To understand the importance of the amendment, which is aimed at sustaining and encouraging a unique characteristic of the British way of life, the clause must be looked at against the backcloth of both the rôle and the function of the voluntary organisation in our rapidly changing society, and of the growing recognition of the inadequacies and the inability of local authorities to carry out the increasing statutory responsibilities placed upon them by Parliament.

In my own city of Liverpool, there are only 50 qualified social workers out of a total of 212. There is a shortage of staff for residential homes for both young and old, and there are now shortages of occupational therapists. In Coventry, there is a 25 per cent. residential staff shortage and there are vacancies for social workers. In Wolverhampton, only 4 per cent. of all staff in residential homes caring for deprived children are trained. The pattern is repeated throughout the country. For this reason, in the past 10 years charitable organisations have responded to new forces developing new purposes and, consequently, have grown in their significance. At home, child poverty, the homeless, the old and lonely and the plight of the disabled and, overseas, starvation and squalor, have seized the imagination and engaged the emotions of people in this country. Older societies have had to become more efficient and more cost effective.

Voluntary organisations have opened up a new vocation for many disillusioned and trained professional workers who find little satisfaction in working within the straitjacket imposed by local authority bureaucracy.

Instead of attempting the impossible by trying, with inadequate resources, to provide stop-gap emergency services for social casualties thrown up by the system, the voluntary charitable organisations provide a wider and more flexible framework without the debilitating effect of ever-increasing case loads. In fact, the voluntary organisations have developed a new kind of social and political force stemming from grass roots participation which the Government clearly do not wish to encourage. The clause is clearly aimed at squashing such initiative.

If, as Nesta Roberts says in her book "Our Future Selves", voluntary organisations should act as the conscience of society, this would be impossible without the amendment being carried. Voluntary bodies have a special message to give to the country and Parliament, and must be encouraged to use their non-party position to express critical or even controversial views on subjects they know best from practical work in the field. I believe that the restraints imposed on charitable bodies, as a condition of registration for tax exemption, makes them unduly nervous about discussing social needs and policies, and too subservient to government.

The final coup de grâce is that by the clause the Government clearly wish to punish voluntary bodies by stopping off the fountain head for their funding and wish, at the same time, by restricting local authority expenditure and financing local authority schemes through the urban aid programme in preference to voluntary body schemes, to limit the impact and considerably reduce the effect of voluntary bodies in society—until, perhaps, they wish to bail them out by taking them over.

As the Director of Social Work in Kent, Nicholas Stacey, said when he wrote in the Sunday Observer: There is a new generation of donor emerging"— which no doubt the Government recognise— who sees his charitable contribution as an expression of political conviction, such people want and expect part of their gift to be used to help change priorities and structures in society which give rise to the social problems which the organisations were set up to alleviate. Perhaps the current belief is that the formulation of social policy should be kept entirely for political parties, and proposals for a form of improvement should not be provided by the voluntary charitable organisations.

It is clear from the clause that the Government are unhappy at this unique conglomerate of voluntary organisations. They see it as essentially a middle-class movement under distinguished and often Royal patronage, with no right to any claim to be part of our heritage. They argue that charity is a legacy of wide gaps between rich and poor, and the class distinction of the past, and that community spirit, the basis of modern social action, is best expressed through publicly-provided services.

Yet Beveridge, Seebohm and others, on the other hand, have elevated voluntary action to be a distinguishing mark of a free society", a contribution to democracy.

It could be that voluntary action of the future will be no more than the resolve of men and women of imagination, energy and compassion to get things done which they believe should be done, within or outside the scope of the statutory services. Although the Government may not like voluntary effort within the Welfare State it will continue, even if it is limping. It is a form of private enterprise, the distinguishing mark of a free society, in which so-called voluntary principles govern our attitudes towards compulsion and the extension of bureaucracy. It amounts to a double answer to the State's doing it all.

First, the State cannot do it all, and secondly, the State must not be allowed to do it all. Let the Government concede that the concept of charity—stern, morally selective and reformatory—has gone and that a new concept of social welfare has taken its place and recast the whole social philosophy which the voluntary bodies inherited. Welfare now goes far beyond the relief for material distress. It aims at the enrichment of life for those who, for whatever cause, are missing or losing what it lies in our power to give. We are concerned now with the quality of life.

Perhaps the Government think that by using the clause they can rid the country of overlapping between voluntary and State provision. In my view social needs will grow faster than they can be dealt with by the combined efforts of voluntary and State action.

The second reason is that the boundaries between the voluntary and statutory sectors are already blurred.

On overlapping and filling gaps, the voluntary bodies should not subsidise rates and taxes by permanently providing services which, Parliament has accepted, are a duty of central and local government. I know how much voluntary bodies need money, but they should not be blackmailed into providing essential services which the local authority should provide. The existence, side by side, of voluntary and State services should stimulate mutual criticism and be of mutual benefit. Non-government agencies have flexibility and freedom from tightly-drawn rules and regulations. They can pioneer and experiment.

Taken all in all, the contribution made by voluntary societies to the substance, quality and scope of our social life and services is very great. How much is lost from amateurish administration is a matter of guesswork—no more, perhaps, than is already wasted by the local authority. But the proof of the pudding is always in the eating, and so long as the voluntary organisations can supply a shockingly deformed bed-ridden boy with a wheelchair while the health department takes weeks to decide whether it shall be supplied under the National Health Service, voluntary action will win—if not every time, then most of the time.

Voluntary organisations, like democracy, are part of the price we pay for the preservation of our liberties and the variety of human experience and service. In the last analysis charitable voluntary organisations call for no self-justification. That they exist and flourish unimpeded in their work is enough. If they fold up we can despair, for the tyranny of bureaucracy will be on its way. If we wish to preserve this unique characteristic of our British way of life, we must accept the amendment, which is of the greatest significance since the passing of the Act of 1601, when charitable work was first recognised.

Mr. Norman Lamont

I should like briefly to support the arguments put forward so eloquently by my hon. Friend the Member for Liverpool, Wavertree (Mr. Steen). All hon. Members are aware of the tremendous strength of feeling about charities. We have all received a large number of letters and circulars, and delegations have been received from religious and leading charitable organisations. I hope that either tonight or later the Chief Secretary will be able to make substantial concessions. I prefer to go along the lines of the amendment which stands in the names of certain Government supporters and deletes the entire reference to charities.

The Government have taken an extraordinary attitude. The £50,000 is not a large sum of money, particularly when it is considered in relation to the requirements of charities which have large capital programmes. Buildings for charities are often paid for by money donated by rich individuals, and it would be a tremendous tragedy if that were prevented in future.

I do not want to develop an ideological argument about voluntary service versus State service, but both sides of the Committee would agree that many of the advances in medical research and various voluntary services have occurred because of private initiatives taken by very wealthy men—

It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.

Committee report Progress.